The Ugandan shilling traded flat against the dollar on Monday, but traders expect the central bank will seek to raise shilling liquidity ahead of a government debt auction, putting pressure on the local currency.

The Ugandan shilling edged up against the dollar on Friday as commercial banks pared down their greenback positions on the back of a lower-than-expected jump in dollar demand by local firms after a recent interest rate cut.

The Ugandan shilling was stable against the dollar on Monday after the central bank intervened last week to try to slow its depreciation, but the market was betting on a weaker local currency ahead of an expected further policy loosening.

The Ugandan shilling fell on Wednesday, nearing a two-month low as banks bought dollars in anticipation of falling yields at Treasury bill sale, leading some offshore investors not to roll over their holdings.

The Ugandan shilling edged up against the dollar on Monday due to lower demand for the greenback and traders expected it to weaken in the medium to long term as a monetary policy easing cycle makes locally-issued debt less attractive.

The Ugandan Shilling is the currency used in Uganda and replaced the East African shilling. Although the currency is supposed to be divisible into 100 cents, no subdivisions have been issued since 1987.